Feb
18
HF 2428…income approach for commercial property taxes By Joe Kelly
ByBy Joe Kelly
House File 2428 - Introduced HOUSE FILE BY SCHUELLER A BILL FOR 1 An Act relating to the valuation of commercial property for 2 purposes of property assessment and taxation, duties of 3 the department of revenue, and including applicability 4 provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: TLSB 5111HH (4) 83 md/sc PAG LIN 1 1 Section 1. Section 441.21, subsection 2, Code Supplement 1 2 2009, is amended to read as follows: 1 3 2. a. In the event market value of the property being 1 4 assessed cannot be readily established in the foregoing manner, 1 5 then the assessor may determine the value of the property using 1 6 the other uniform and recognized appraisal methods including 1 7 its productive and earning capacity, if any, industrial 1 8 conditions, its cost, physical and functional depreciation and 1 9 obsolescence and replacement cost, and all other factors which 1 10 would assist in determining the fair and reasonable market 1 11 value of the property but, except as otherwise provided in the actual value shall not be determined 1 12 paragraphs "b" and "c", 1 13 by use of only one such factor. The following shall not be 1 14 taken into consideration: Special value or use value of the 1 15 property to its present owner, and the goodwill or value of 1 16 a business which uses the property as distinguished from the 1 17 value of the property as property. 1 18 b. In assessing and determining the actual value of 1 19 commercial property, the assessor shall, if feasible, first 1 20 consider an income approach measuring productive and earning 1 21 capacity of the property using uniform and recognized appraisal 1 22 methods and capitalized at a rate determined by the assessor. 1 23 An income approach to valuation, including a method for 1 24 determining capitalization rates for the various commercial 1 25 uses of property, shall be established by rule by the 1 26 department. The income approach established by the department 1 27 may take into account the stabilized vacancy rate or stabilized 1 28 expenses associated with each property. 1 29 c. However, in In assessing property that is rented or 1 30 leased to low=income individuals and families as authorized by 1 31 section 42 of the Internal Revenue Code, as amended, and which 1 32 section limits the amount that the individual or family pays 1 33 for the rental or lease of units in the property, the assessor 1 34 shall use the productive and earning capacity from the actual 1 35 rents received as a method of appraisal and shall take into 2 1 account the extent to which that use and limitation reduces 2 2 the market value of the property. The assessor shall not 2 3 consider any tax credit equity or other subsidized financing 2 4 as income provided to the property in determining the assessed 2 5 value. The property owner shall notify the assessor when 2 6 property is withdrawn from section 42 eligibility under the 2 7 Internal Revenue Code. The property shall not be subject to 2 8 section 42 assessment procedures for the assessment year for 2 9 which section 42 eligibility is withdrawn. This notification 2 10 must be provided to the assessor no later than March 1 of the 2 11 assessment year or the owner will be subject to a penalty of 2 12 five hundred dollars for that assessment year. The penalty 2 13 shall be collected at the same time and in the same manner as 2 14 regular property taxes. 2 15 d. Upon adoption of uniform rules by the department of 2 16 revenue or succeeding authority covering assessments and 2 17 valuations of such properties described in this subsection, the 2 18 valuation on such properties shall be determined in accordance 2 19 with such rules and in accordance with forms and guidelines 2 20 contained in the real property appraisal manual prepared by the 2 21 department as updated from time to time for assessment purposes 2 22 to assure uniformity, but such rules, forms, and guidelines 2 23 shall not be inconsistent with or change the foregoing means of 2 24 determining the actual, market, taxable, and assessed values. 2 25 e. When using any uniform and recognized appraisal method 2 26 to value property, the following shall not be taken into 2 27 consideration: 2 28 (1) Special value or use value of the property to its 2 29 present owner. 2 30 (2) The goodwill or value of a business which uses the 2 31 property as distinguished from the value of the property as 2 32 property. 2 33 Sec. 2. ADOPTION OF RULES == CONTINUING EDUCATION PROVIDED 2 34 BY THE DEPARTMENT OF REVENUE. 2 35 1. The department of revenue shall adopt the rules required 3 1 under section 441.21, subsection 2, paragraph "b", as enacted in 3 2 this Act, not later than January 1, 2011. 3 3 2. As part of continuing education programs under section 3 4 441.8, the director of revenue shall establish, designate, or 3 5 approve courses, workshops, seminars, or symposiums relating 3 6 to the income approach established by rule pursuant to section 3 7 441.21, subsection 2, paragraph "b", as enacted in this Act. 3 8 Not less than five such courses, workshops, seminars, or 3 9 symposiums shall be established, designated, or approved during 3 10 each of the two assessment years following adoption of the 3 11 rules. 3 12 Sec. 3. APPLICABILITY. This Act applies to assessment years 3 13 beginning on or after January 1, 2012. 3 14 EXPLANATION 3 15 This bill requires assessors to, if feasible, first consider 3 16 an income approach measuring productive and earning capacity of 3 17 the property using uniform and recognized appraisal methods and 3 18 capitalized at a rate determined by the assessor when assessing 3 19 and determining the actual value of commercial property. The 3 20 bill requires the department of revenue to adopt rules that 3 21 establish an income approach to valuation, including a method 3 22 for determining capitalization rates for various commercial 3 23 uses of property. The income approach established by the 3 24 department may take into account the stabilized vacancy rate or 3 25 stabilized expenses associated with each property. 3 26 The bill requires the department of revenue to adopt the 3 27 rules relating to the income approach not later than January 3 28 1, 2011. The bill also requires the director of revenue to 3 29 establish, designate, or approve courses, workshops, seminars, 3 30 or symposiums relating to the income approach established by 3 31 rule. Not less than five such courses, workshops, seminars, or 3 32 symposiums must be established, designated, or approved during 3 33 each of the two assessment years following adoption of the 3 34 rules. 3 35 This Act applies to assessment years beginning on or after 4 1 January 1, 2012. LSB 5111HH (4) 83 md/sc
